Who will bear the burden of a $0.50 tax placed on soda suppliers (consumer or seller) in a soda market where Qd = 225-10P and Qs = 50 + 15P? A) Consumers pay $0.30 of the tax, bearing the burden. B) Consumers pay $0.25 of the tax, bearing the burden. C) Sellers pay $0.25 of […]
Date: September 9th, 2020
If the supply curve is perfectly inelastic and the demand curve is a downward sloping straight line, what is the effect of a consumer ad valorem tax on equilibrium price and quantity? A) Price remains unchanged and quantity increases. B) Price decreases and quantity increases. C) Price decreases and quantity remains unchanged. D) Price and […]
Date: September 9th, 2020
Suppose that a specific tax of $3 is imposed on consumers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the consumers’ tax burden? A) Consumers’ tax burden is $1.30. B) Consumers’ tax burden is $1.00. C) Consumers’ tax burden is […]
Date: September 9th, 2020
In the case of a specific tax, tax incidence is independent of who pays A) only when supply and demand elasticities are not constant. B) only when the tax is collected from consumers. C) in most but not all cases. D) in all cases. ANSWER D
Date: September 9th, 2020
In the case of a specific tax the resulting price received by producers depends on A) who pays the tax. B) the price elasticity of supply. C) the price elasticity of demand. D) All of the above. ANSWER D
Date: September 9th, 2020
Electricity accounts for almost 20% of the cost of making steel. A 10% increase in electricity prices results in steel firms decreasing production and thereby demanding 5% less electricity. Over many years, technological innovations can change the way steel firms make steel and reduce the industry’s energy requirements. This suggests that the steel industry’s short-run […]
Date: September 9th, 2020
If a linear supply curve has a zero intercept, the elasticity of supply is always unitary. Indicate whether the statement is true or false ANSWER True . A linear supply curve from the origin takes the form Q = ap. Elasticity equals a ∗ p/Q. Substituting for Q yields a ∗ p/ap. Numerator and […]
Date: September 9th, 2020
As the demand for corn increases to provide input for ethanol production, what is expected to happen to the price elasticity of corn supply? A) It will decrease. B) It will become zero. C) It will increase. D) It will not change. ANSWER A
Date: September 9th, 2020
The rising price of oil has made it feasible to extract oil out of oily sand in Canada. Concerning the oil market this is an example of A) a higher price elasticity of supply in the long run. B) a higher price elasticity of supply in the short run. C) a higher price elasticity of […]
Date: September 9th, 2020
The short-run elasticity of supply is less than the long-run elasticity of supply A) because consumers’ tastes and preferences change in the long run but not in the short run. B) because producers can adjust the amount of machinery in the long run but not in the short run. C) only for durable goods. D) […]
Date: September 9th, 2020
